Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128476
Authors: 
Rhodes, Andrew
Wilson, Chris
Year of Publication: 
22-Feb-2016
Abstract: 
There is widespread evidence that some firms use false advertising to overstate the value of their products. Using a model in which a policymaker is able to punish such false claims, we characterize a natural equilibrium in which false advertising actively influences rational buyers. We analyze the effects of policy under different welfare objectives and establish a set of demand and parameter conditions where policy optimally permits a positive level of false advertising. Further analysis considers some wider issues including the implications for product investment and industry self-regulation.
Subjects: 
Misleading Advertising
Pass-through
Product Quality
JEL: 
M37
L15
D83
Document Type: 
Preprint

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